Third Quarter Highlights:

Systems revenue more than doubled sequentially, and net loss was cut in half over the prior quarter.

Shipments in the quarter included two DRIE systems: a multi-module cluster system to a high volume manufacturer of MEMS-based sensors and a second system to a leading supplier of substrates and services in the integrated circuit and MEMS sensor markets.

The company received an order during the quarter for an Endeavor AT PVD cluster tool from a leading manufacturer of MEMS imaging sensors.

The company reduced operating expenses by 20% from the immediately preceding quarter. Reflecting the continued weakness in the global economy, the company continues to streamline operations and initiated another 10% reduction in its workforce (on top of the 10% announced in the second quarter of fiscal 2009).

Financial Results:

Revenues increased from the previous quarter by 123% from $2 million.

Gross profits for the third quarter of fiscal 2009 were 30.5% compared to 43.8% in the same period last year, and down from 50.8% in the prior quarter.

Operating loss for the third quarter was ($1.4) million, including about $0.4 million of non-cash charges. Operating income in the same period last year was $1.7 million. That period’s operating expenses included $0.5 million of non-cash charges. The operating loss for second quarter of fiscal 2009 was $2.4 million, which included $0.5 million of non-cash charges.

Backlog at the end of third quarter of fiscal 2009 was $2.8 million.

During the third quarter of fiscal 2009, the company’s operational use of cash declined significantly to $1 million, showing substantial improvement over the prior quarter burn of $2 million. Cash at the end of the fiscal third quarter of 2009 was $12.7 million. Over the same three month period, inventories increased by $0.4 million to $14.1 million, accounts receivable increased by $1.6 million to $6.2 million, and accounts payable increased by $1.2 million to $1.8 million.

As of December 31, 2008, the company’s total shares outstanding were 8,412,676.

“The additional shipments of DRIE systems this quarter, so soon after the completion of our acquisition of the DRIE product line from Alcatel Micro Machining Systems (AMMS), is further evidence that our strategy to achieve a leading position among MEMS producers is working,” said Thomas Mika, president and chief executive officer of Tegal. “In addition, our PVD products are increasingly recognized by MEMS producers for their critical role in the development of advanced imaging sensors and other MEMS devices, a market that is still growing despite the overall weakness in the global economy.”

“Despite completing the integration of the AMMS acquisition during the quarter, we substantially reduced operating expenses and our cash burn rate compared to last quarter,” continued Mika. “We believe these are the steps that are necessary in the current economic climate and will continue to conserve cash, enabling us to protect our balance sheet and improve our competitive position as the economy turns around.”